Financial Analysts Can Make Comparisons Between the Long-Lived Assets of Two

question 69

Multiple Choice

Financial analysts can make comparisons between the long-lived assets of two companies,both of which use straight-line depreciation,by computing the average useful life of assets with which one of the following formulas?

• A)Net depreciable property,plant,and equipment/average useful life.
• B)Gross depreciable property,plant,and equipment/average useful life.
• C)Gross depreciable property,plant,and equipment/straight-line depreciation expense.
• D)Straight-line depreciation expense/net depreciable property,plant,and equipment.

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Definitions:

Acquisition of Inventory

The process of obtaining goods or materials for sale or use, either through purchase or production.

Purchases Account

A general ledger account in which the purchases of goods intended for resale are recorded.

Gross Profit

The difference between sales revenue and the cost of goods sold before deducting operating expenses, interest, and taxes.

Overall Profitability

An assessment of a company's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time.